Apex Court orders full waiver of interest on interest in Loan Moratorium case

Apex Court orders full waiver of interest on interest in Loan Moratorium case

The Supreme Court of India directs that there shall be full waiver of interest on interest (compound interest) with respect to EMIs which were not paid by borrowers after availing the loan moratorium scheme extended by RBI during March 1st to August 31st in view of the COVID-19 pandemic (Small Scale Industrial Manufactures Association v. Union of India).

The Court held that any amount collected as compound interest shall be adjusted to the next installment payable instead of refunding it to the borrower.

Details of the Order are :-

IN THE SUPREME COURT OF INDIA

CIVIL ORIGINAL JURISDICTION

The Relevant Text of the Order as follows :

32. In view of the above and for the reasons stated hereinabove, the present petitions seeking reliefs, namely, (i) total waiver of interest during the moratorium period; (ii)to extend the period of moratorium; (iii) to extend the period for invocation of the resolution mechanism, namely 31.12.2020 provided under the 6.8.2020 circular; (iv)that there shall be sectorwise reliefs provided by the RBI; and (v)that the Central Government/RBI must provide for some further reliefs over and above the relief packages already offered stand dismissed. Connected IAs stand disposed of.

However, it is directed that there shall not be any charge of interest on interest/compound interest/penal interest for the period during the moratorium and any amount already recovered under the same head, namely, interest on interest/penal interest/compound interest shall be refunded to the concerned borrowers and to be given credit/adjusted in the next instalment of the loan account. All these petitions are partly allowed to the aforesaid extent only and as observed for the reliefs, the petitions are dismissed. Interim relief granted earlier not to declare the accounts of respective borrowers as NPA stands vacated. However, there shall be no order as to costs.

Writ Petition (Civil) No. 955 of 2020

Writ Petition (Civil) No. 955 of 2020 stands disposed of in terms of the statement made by Shri V. Giri, learned Senior Advocate appearing on behalf of the RBI that Circular dated 27.03.2020 shall be applicable to all banks, nonbanking financial companies, housing finance companies and other financial institutions compulsorily and mandatorily.

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